The availability of open Application Programming Interfaces (APIs), that banks in Europe will be forced to provide for third parties after passing of the second Payment Services Directive (PSD2) by the European Union Commission on 8 October 2015. APIs are standards of direct communication between various pieces of software, for example between banks and retailers systems. This is important not only for financial institutions, but for e-commerce as well.

Conversational banking: the new UI

In the old times user interface of a bank was the bank teller at the branch. From today’s perspective it was inconvenient and time consuming, but the bank had a human face.

Now we are interacting with our banks by clicking on links, menus, and buttons, and filling out forms. But banking apps are often hard to use, overly complex and ugly. Lack of true customer-centricity and technological debt on the back-end side of things make the banking experience frustrating.

How can we make digital banking easier, more simple, more personal and human? By giving it a new face: of a robot!

Meet BankBot. It is the new digital bank teller, personal assistant, and a financial advisor. When you sign in to your K2 Bank account BankBot will greet you and ask for orders.

The main interface of K2 Bank is instantly familiar if you ever used Slack (over two millions of people use it in the office everyday), or Facebook Messenger, or an SMS app, or IRC (then you’re really old school!). It’s never ending stream with history of communications from bottom (recent) to the top (oldest) of the screen.

You type your command or question, and BankBot will answer. BankBot understands natural language, but it pays special attention for keywords, that will trigger actions, like a new transfer or searching in history, or credit card cancellation.

Just type in “Send 100 EUR to Anna” and BankBot will search it’s database for possible recipients matching „Anna” and let you choose the one you mean. Or you can add a new recipient. Then BankBot will sent confirmation code to your cell phone and ask you to type it in, and it’s done. You don’t need to click and move your hands from the keyboard.

Of course this the easiest scenario (similar to sending money via SquareCash or SnapCash), but almost every operation can be completed that way. Typing a recipient’s name will show you recent transactions with her from your account history and option for a new payment. Typing “USD” will show you currency exchange rate. If you need help type “help”. If you need to contact human staff at the bank type “human” and you can chat with real person from customer service instead of a bot. Or type „concierge” if you’re a Private Banking client.

There is also a way to access features using the Hamburger menu at the bottom— it opens a list of options, just like typing “/” (slash) in Slack.

BankBot as an advisor

Personal Finance Managers (PFMs) for controlling home budget are popular additions to banking systems. But they are complicated, often hidden deep in the nested menus, and they need a lot of user’s attention. Do people really use them?

Fewer than 22% of customers in the US and Europe have used a single money management feature in the last 90 days.

(…) They don’t want insight, beyond one or two bite size chunks.

BankBot can provide just that. You can ask “Expenses this month”, or “Car expenses”, and it will show you a simple chart with relevant information.

This is “pull” mechanism, but BankBot can also be proactive, pushing important information to the user. It can warn you that you are close to exceeding your monthly budget. It can remind you about regular payments you usually make each month. It can remind you to pay off your credit card. Or pay your tax. It can suggest better options to save or invest your money, and show you how much more you can earn. It can offer you a loan, when you probably need it. Or offer travel insurance, when he knows you’ve just bought plane tickets. Or up-sell you a better account or credit card, when it will notice that you’ve got a pay rise. Or it can alert you when you should do something with your stocks portfolio.

Banking on mobile, wearables, IOT

Chat banking is nice on the desktop, but it’s even more effective on mobile — type a few words and it’s done, just like sending an SMS. Or you can talk to BankBot (speech2text). Authentication can be provided by fingerprint sensor. You can receive important alerts as push notifications on your phone or smartwatch, and immediately take action (or dismiss). You can even get discount on your health insurance based on physical activity data from your fitness band or Apple Watch.

BankBot can also live inside smart devices like the Amazon Echo, which provides its own API for developers — smart home and smart banking mixed together. Or inside the Facebook Messenger chat.

Amazon Echo

APIs and app stores

The second Payment Services Directive is to be transposed into national regulations across the European Union from 2016. Its goal is to open the banking market. PSD2 will force banks to provide access via APIs to their customer accounts and provide account information to third party service providers if the account holder wishes to do so. This is called „Access to the Account” (XS2A) and it’s not optional, banks will have to evolve as third parties enter their space.

PSD2 defines traditional financial institutions (banks) as “Account Servicing Payment Service Providers” (AS PSP), and new players as “Account Information Service Providers” (AISP) or “Payment Initiation Service Providers” (PISP). Both PISPs and AISPs will have to register with the “competent authority” in their home Member State for security reasons.

AISPs targets “aggregated online information on one or more payment accounts held with one or more other payment service providers”. For example this may be a Personal Finance Management app presenting data from different banks and accounts aggregated on a single dashboard.

PISPs are able to initiate payments via internet websites on behalf of the account holder, if the account holder gives permission. Again, banks are obliged by law to enable this functionality. This will create a new real-time, or immediate payment solutions and it is probably the biggest technological innovation in retail banking since the internet. The merchant and the bank will communicate directly to each other using an open API.

What are the implications of this for our system?

The quality of banking user interfaces will be extremely important, because bank’s clients could choose to manage their account from third party provider app with better UX or functionality, cutting themselves from any direct communication with their bank. In this case the bank will be reduced to a „dumb pipe” in the value chain. But fighting this by providing to the third parties only the minimum APIs required may be a bad strategy for banks. We think they should be more open, actively partnering with other financial institutions, retailers, merchants and startups.

We imagine K2 Bank solution providing an AppStore based on its APIs. Users will be able to give permission to third party service providers in a way you allow applications to access your Facebook or Twitter account today.

You will be able to buy stuff at your authorized retailer without logging into your bank (or without visiting the retailer site, but from yours bank app). There is no need to provide credit card number, probably even shipping address or any data. The bank can automatically offer you a purchase by installments. Or it can give you a discount, because of your history of frequent past transactions online and offline with this retailer (there will be no need for customer loyalty cards anymore).

The bank can become an advertising channel for the retailers too, offering personalized promotions for its customers. This should be opt-out, but if your cell-phone contract is ending, and BankBot messages you with a really great offer for a plan with a cheap newest iPhone, and you can buy it instantly with one click, would you mind?

By building the thriving ecosystems banks and third parties can both win. And we hope customers will too.

Want to know more? Talk to us!

If you want to know more about K2 Bank solution, it’s design, technology behind the BankBot, and possibilities of implementation, don’t hesitate to contact us.

Of course conversational interfaces like BankBot can be used not only in banking, but also insurance, online commerce, travel, healthcare and many other industries.

K2 Internetis a leading digital product design and communications agency in Poland. We develop digital services, apps and websites with a strong focus on user experience. We have a long-time experience partnering with financial institutions — in the last 10 years we helped to envision, design and develop over 10 transactional systems for the biggest banks in Poland.

Stanusch Technologiesis K2 Bank’s technology provider for BankBot. The company is involved in research and development of the use of artificial intelligence in business. It carry out projects related to natural language processing and semantic information retrieval. It has become a world leader in the number of carried out projects of virtual advisors/chatbots.